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Japan: Ups and downs in bank sector M&A

The closing months of 2007 are proving to be full of intrigue for watchers of the Japanese banking industry, with the year’s two biggest M&A deals experiencing setbacks while smaller banks look to forge new alliances.

Citi’s acquisition of the remaining stock in broker Nikko Cordial threatens to create a powerful alliance between the US group’s global reach and experience, and the Japanese firm’s local distribution network. Citi is using its own shares to buy Nikko Cordial in a stock swap but those shares have declined so sharply in value in the past few months (down from $50 in September to $31 now) that the terms of the agreement have been revised. Previously, Nikko shareholders would have received ¥1,700 of Citi shares per Nikko share, assuming the former traded at an average value of between $37 and $58 on January 15 to 17 next year. Now that Citi is trading well below the minimum threshold, it has decided to mollify worried Nikko shareholders by offering the agreed ¥1700-worth of Citi stock per Nikko share regardless of its present performance.

This isn’t the only stock-swap merger to have suffered lately. Mizuho Securities and Shinko Securities have delayed their scheduled January 1 wedding after the former aired some dirty laundry, namely a ¥15.9

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